FACTORS AFFECTING INVESTMENT DECISIONS OF PENSION SCHEMES IN KENYA

Sharon Chepkoech

Abstract


This study sought to determine the factors affecting investment decisions of Pension schemes in Kenya. Its objectives were to: establish the effect of risk-return tradeoff on investment decisions of pension schemes in Kenya and determine the effect of macroeconomic factors on investment decisions of pension schemes in Kenya. It was conceptualized that investment decisions in pension schemes (dependent variable) were dependent on risk–return trade off and macroeconomic factors (the independent variables). The investment decisions of pension schemes depend on the overall influence of these factors.  The study adopted the descriptive research design. The study sampled 125 fund managers from 1232 pension schemes using simple random stratified sampling techniques. Data was collected using questionnaire. Statistical Package for the Social Sciences (SPSS) was used to analyze the data.  On the basis of the study findings, it was evident that risk-return trade off affected investment decisions of pension schemes in Kenya.  It was made apparent that successful pension schemes investment should be one whose returns justify the risk taken. In this regard, it was evident that fund managers balanced the risk to ensure optimal return. Regarding the effect of macroeconomic factors on investment decisions of pension schemes in Kenya, it was evident that pension schemes investment decision were  influenced by interest rates, capital markets performance, the rate of national economic growth  and other macroeconomic factors before making investment decisions. 

Keywords: Risk-return trade off, Macroeconomic Factors, Investment Decisions, Pension Schemes in Kenya


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